A big swing and a miss in Coalition pledge to axe spending

John Watson

Oppositions habitually lament the difficulty of getting people to pay attention to their policies; Gareth Evans famously suffered ''relevance deprivation syndrome'' within weeks of Labor losing office in 1996.

His unhappy successors in opposition, the Coalition, can now verify that complaint. Opposition Leader Malcolm Turnbull, shadow treasurer Joe Hockey and shadow finance minister Helen Coonan lined up last week to release the Coalition's Debt Reduction Strategy, which aims to cut Government spending to less than 25 per cent of gross domestic product (GDP).

The media, in a feeding frenzy over leadership speculation, ignored it - only two press reports made passing mention of the policy target.

So, for those who missed it, the Institute of Public Affairs' John Roskam summed up the implications: ''Did you see Malcolm Turnbull's press conference this morning? He wants to cut the size of the Federal Government by about 12.5 per cent. Good.''

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While not everyone may agree with his one-word verdict - that's a debate for the next election - it is remarkable that journalists ignore the Coalition commitment to such a big cut in spending with an election looming within a year.

To put a figure on it, government spending in 2009-10 is forecast at 28.6 per cent of GDP, or about $340 billion. The Coalition is proposing a cut of more than $40 billion a year - more than the education budget and almost as much as the health budget. Surely that's something Australians ought to know.

The Coalition has a point when it warns that the Government must pay for its stimulus spending by some combination of higher taxes and spending cuts, and 28.6 per cent of GDP is a historically high level of spending. The Coalition has already made its choice, however, if anyone bothers to listen. ''The Coalition does not believe higher taxation is inevitable,'' Mr Hockey said last month in a speech entitled ''Responding to the Current Recession'', which, as he conceded, was prematurely titled some time in advance. That may have had something to do with the stimulus spending, although, in a radio interview a week later, Mr Hockey disputed that with inscrutable logic: ''The Federal Government is spending money on a scale that we had never seen before and it is having a profound impact on communities that is detrimental in many cases …'' At which point the interviewer cut in: ''But an impact that is keeping us out of recession.'' Hockey: ''Well, no it isn't, because we have not gone into recession.'' Hmmm.

Regardless, both the Government and Opposition accept the need to reduce spending - they differ over timing and degree - and to exert tighter control over where the surviving funds go, now that the crisis seems to have passed. By the end of forward estimates, June 2013, the Government expects spending to be 26.4 per cent of GDP. As for rising net government debt, Australia's is forecast to be the least of any developed country, at 5.2 per cent of GDP in 2011-12. The OECD average is nine times that.

Still, as Mr Hockey argues, low debt is a legacy of the Howard government, which left Labor with a spending ratio of 24 per cent of GDP - albeit helped more than a little by a global economic boom of unprecedented duration. Somewhat surprisingly, the 1995-96 ratio, when the Keating government lost office, was not that different, at 25.3 per cent. The Coalition slashed that to 21.6 per cent by 2005-06. This 14.5 per cent cut in ''the size of the Federal Government'' involved considerable pain and was not universally hailed as good. After that, even in economic good times, the Howard government's election commitments blew out spending to 24 per cent of GDP.

As then treasurer Peter Costello recalled, when John Howard was asked to pick two or three of the best policy options for the 2004 campaign, ''he ordered everything on the menu: entree, main, dessert, the vegetarian option''.

Part of the reason the Coalition lost office in 2007 might have been that voters felt the government had spent too long hoarding away too much in record surpluses and invested too little in education, health and infrastructure. Now the Opposition is again offering voters a choice: between Labor's continued spending in those areas and a slow retirement of debt, and the Coalition's own preference for sharp spending cuts.

Not that Australians would know if they relied on coverage of politics as a battle of personalities, to the virtual exclusion of policy. We're so focused on the salesmen, we forget about the product. But, hell, between you, me and the Government, what's $40 billion here or there?

John Watson is an Age senior writer.

4 comments

Has there ever been a case when Treasury's "forward estimates" were actually proved correct?

Commenter

Misha

Location

Selby

Date and time

October 14, 2009, 11:41AM

Very simply; the more things change the more they stay the same. So, whats new????

Commenter

phil

Date and time

October 14, 2009, 12:11PM

I think we hear way more about the bloody opposition these days than we do about the government!

And after the massive cuts to the public service since the 90s and the difficulty in getting any kind of service from government departments - federal, state and local - these days, I don't think PS cuts are a vote-winner anymore.

Commenter

Daphon

Location

Sydney

Date and time

October 14, 2009, 3:20PM

Why anyone would vote for job cuts and razor gangs is beyond me? Only people with no brains would follow that mantra?